ROCKET PHARMACEUTICALS, INC.

In June 2025, the Company’s Board of Directors approved a restructuring plan to reduce the Company’s workforce and incurred aggregate charges of $3.2 million in restructuring expenses, consisting of employee severance payments and other termination benefits.

Other Income, Net

Other income, decreased by $5.8 million to $8.6 million for the year ended December 31, 2025, compared to the year ended December 31, 2024. The decrease in other income was primarily driven by a decrease in interest and other income, net, of $5.0 million due to a decrease in interest earned on investments due to lower investment balance and interest rates year over year and a decrease in fair value of warrant liabilities in 2024 of $1.9 million, and a decrease in accretion of discount on investments, net, of $0.8 million.

Liquidity and Capital Resources

We have not generated any revenue and have incurred losses since inception. Operations of the Company are subject to certain risks and uncertainties, including, among others, those related to drug candidate development, technology and data security, patents and proprietary rights, our lack of commercial manufacturing marketing or sales experience, dependency on key personnel, compliance with government regulations and the need to obtain additional financing. Drug candidates currently under development will require significant additional R&D efforts, including extensive preclinical and clinical testing and regulatory approval, prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel infrastructure, and extensive compliance-reporting capabilities.

Our drug candidates are in the development and clinical stage. There can be no assurance that our R&D will be successfully completed, that adequate protection for our intellectual property will be obtained, that any products developed will obtain necessary government approval or that any approved products will be commercially viable. Even if our product development efforts are successful, it is uncertain when, if ever, we will generate significant revenue from product sales. We operate in an environment of rapid change in technology and substantial competition from pharmaceutical and biotechnology companies.

Our consolidated financial statements have been prepared on the basis of continuity of operations, realization of assets and the satisfaction of liabilities in the ordinary course of business. We have incurred net losses and negative cash flows from its operations each year since inception. We have incurred net losses of $223.1 million and $258.7 million for the years ended December 31, 2025, and 2024, respectively. We have experienced negative cash flows from operations of 190.0 million and $209.7 million for the years ended December 31, 2025 and 2024, respectively, and have an accumulated deficit of $1.44 billion as of December 31, 2025. As of December 31, 2025, we had $188.9 million of cash, cash equivalents and investments. We believe that in accordance with the current operating plan, which reflects a strategic corporate reorganization and reprioritization announced in July 2025, such resources will be sufficient to fund our operating expenses and capital expenditure requirements into the second quarter of 2027. We have financed our operations primarily through proceeds from the sale of equity securities and continue to manage our capital resources with discipline and a focus on long-term sustainability.

On August 18, 2024, CIRM awarded the Company up to $5.8 million under a CLIN2 grant award to support the clinical development of its AAV-based gene therapy, RP-A501 for the treatment of DD. Proceeds from the grant would help fund clinical trial costs as well as manufactured drug product for Phase 1/2 patients. As of December 31, 2025, the Company has received RP-A501 grants of $5.0 million from CIRM.

In the longer term, our future viability is dependent on our ability to generate cash from operating activities or to raise additional capital to finance our operations. If we raise additional funds by issuing equity securities, our stockholders will experience dilution. Any future debt financing into which we enter may impose upon us additional covenants that restrict our operations, including limitations on our ability to incur liens or additional debt, pay dividends, repurchase our common stock, make certain investments and engage in certain merger, consolidation, or asset sale transactions. Any debt financing or additional equity that we raise may contain terms that are not favorable to us or our stockholders. We may also raise capital through the sale of priority review vouchers to third parties. Our failure to raise capital as and when needed could have a negative impact on our financial condition and ability to pursue our business strategies.

Public Offering and Private Placement

On December 12, 2024, the Company completed the Offering of approximately 15.2 million shares of its common stock at a public offering price of $12.50 per share and Private Placement of pre-funded warrants to purchase 0.4 million shares of common stock at a price of $12.49 per warrant. The gross proceeds from the Offering and Private Placement were approximately $194.7 million, net of $12.2 million of offering costs, underwriting discounts and commissions, legal and other expenses for net proceeds from the Offering and Private Placement of $182.5 million.

Contractual Obligations

In the normal course of business, we enter into contracts and commitments that obligate us to make payments in the future. Information regarding our obligations relating to income taxes and lease arrangements are provided in “Note 12. Income Taxes” and “Note 13. Leases” to our consolidated financial statements contained in “Item 8. Financial Statements and Supplementary Data.”

We do not have any off-balance sheet arrangements that are material or reasonably likely to become material to our financial condition or results of operations.

Cash Flows

The following table summarizes our cash flows from operating, investing and financing activities, in thousands, for each of the periods presented:

Operating Activities

During the year ended December 31, 2025, operating activities used $190.0 million of cash and cash equivalents, primarily resulting from our net loss of $223.1 million offset by net non-cash charges of $41.4 million, including non-cash stock-based compensation expense of $37.1 million, depreciation, amortization expense of $11.0 million and impairment of right of use asset of $0.3 million, partially offset by accretion of discount on investments of $7.0 million. Changes in our operating assets and liabilities for the year ended December 31, 2025 included a decrease in accounts payable and accrued expenses of $10.4 million and a decrease in our prepaid expenses and other assets of $2.1 million.

During the year ended December 31, 2024, operating activities used $209.7 million of cash and cash equivalents, primarily resulting from our net loss of $258.7 million offset by net non-cash charges of $43.3 million, including non-cash stock-based compensation expense of $43.9 million, depreciation and amortization expense of $9.4 million, partially offset by accretion of discount on investments of $8.1 million and change in fair value of warrant liabilities of $1.9 million. Changes in our operating assets and liabilities for the year ended December 31, 2024, included an increase in accounts payable and accrued expenses of $6.1 million and an increase in our prepaid expenses and other assets of $0.7 million.

Investing Activities

During the year ended December 31, 2025, net cash provided by investing activities was $103.8 million, primarily resulting from proceeds of $380.8 million from the maturities of investments, offset by purchases of investments of $276.6 million, and purchases of property and equipment of $0.4 million.

During the year ended December 31, 2024, net cash provided by investing activities was $131.7 million, primarily resulting from proceeds of $383.5 million from the maturities of investments, offset by purchases of investments of $245.9 million, and purchases of property and equipment of $5.9 million.

Financing Activities

During year ended December 31, 2025, net cash provided by financing activities was $0.1 million of cash, consisting of return of short-swing profits of $0.2 million partially offset by repurchase of RSUs of $0.1 million.

During year ended December 31, 2024, net cash provided by financing activities was $185.7 million, consisting primarily of proceeds related to the December 12, 2024 public offering of $182.5 million and $3.2 million from the exercise of stock options.

Critical Accounting Policies and Estimates

Our management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in conformity with U.S. GAAP. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We periodically review our estimates as a result of changes in circumstances, facts and experience. The effects of material revisions in estimates are reflected in the financial statements prospectively from the date of the change in estimate.

For a description of our significant accounting policies, refer to “Note 3. Summary of Significant Accounting Policies” included in the notes to our consolidated financial statements appearing elsewhere in this report. We consider the most critical accounting policies to be those related to our Accrued R&D Expenses, Stock-Based-Compensation, Goodwill and Intangible Assets.

Goodwill

Business combinations are accounted for under the acquisition method. The total cost of an acquisition is allocated to the underlying identifiable net assets, based on their respective estimated fair values as of the acquisition date. Determining the fair value of assets acquired and liabilities assumed requires management’s judgment and often involves the use of significant estimates and assumptions, including assumptions with respect to future cash inflows and outflows, discount rates, asset lives and market multiples, among other items. Assets acquired and liabilities assumed are recorded at their estimated fair values. The excess of the purchase price over the estimated fair values of the net assets acquired is recorded as goodwill. Goodwill is tested for impairment annually as of December 31, or more frequently when events or changes in circumstances indicate that the asset might be impaired. Examples of such events or circumstances include, but are not limited to, a significant adverse change in legal or business climate, an adverse regulatory action or unanticipated competition. The Company has one segment and one reporting unit and as such reviews goodwill for impairment at the consolidated level. When testing goodwill, the Company has the option to first assess qualitative factors for reporting units that carry goodwill. The qualitative assessment includes assessing the totality of relevant events and circumstances that affect the fair value or carrying value of the reporting unit. These events and circumstances include macroeconomic conditions, industry and competitive environment conditions, overall financial performance, reporting unit specific events and market considerations. The Company also considers recent valuations of the reporting unit, including the magnitude of the difference between the most recent fair value estimate and the carrying value, as well as both positive and adverse events and circumstances, and the extent to which each of the events and circumstances identified may affect the comparison of a reporting unit’s fair value with its carrying value. If the qualitative assessment results in a conclusion that it is more likely than not that the fair value of a reporting unit exceeds the carrying value, then no further testing is performed for that reporting unit.

In May 2025, two patients participating in the Phase 2 pivotal study of RP-A501 each experienced an unexpected SAE after which the FDA placed a clinical hold on the trial to allow for further evaluation. In response to the unexpected SAEs, the Company performed a quantitative assessment of its goodwill and determined that there was no impairment at June 30, 2025. The clinical hold on the trial was subsequently lifted by the FDA after the Company satisfactorily addressed issues outlined in the clinical hold.

The Company performed qualitative annual assessments of its goodwill and determined that it was more likely than not that the fair value of the reporting unit exceeded the carrying value of the reporting unit as of and for the years ended December 31, 2025 and 2024. As a result, the Company determined that there was no goodwill impairment for the years ended December 31, 2025 and 2024.

Intangible Assets

Intangible assets consists of IPR&D assets. Intangible assets related to IPR&D projects are considered to be indefinite-lived until the completion or abandonment of the associated R&D efforts. If and when development is complete, which generally occurs if and when regulatory approval to market a product is obtained, the associated assets would be deemed finite-lived and would then be amortized based on their respective estimated useful lives at that point in time. IPR&D intangible assets which are determined to have had a drop in their fair value are adjusted downward and an expense recognized in R&D expenses in the Consolidated Statements of Operations. These IPR&D intangible assets are tested at least annually or when a triggering event occurs that could indicate a potential impairment based on indicators including progress of R&D activities, changes in projected development of assets, and changes in regulatory environment and future commercial markets. If a triggering event occurs that would indicate a potential impairment, the Company will perform a quantitative analysis to determine whether it is more likely than not that the fair value is below carrying amount. The annual impairment assessment for the IPR&D asset was performed as of December 1, 2025 and 2024. No impairment of the IPR&D asset was recorded for the years ended December 31, 2025 and 2024.

Accrued R&D Expenses

As part of the process of preparing our consolidated financial statements, we are required to estimate our accrued R&D expenses. This process involves reviewing open contracts and purchase orders, communicating with our personnel to identify services that have been performed on our behalf and estimating the level of service performed and the associated costs incurred for the services when we have not yet been invoiced or otherwise notified of the actual costs. The majority of our service providers invoice us in arrears for services performed, on a pre-determined schedule or when contractual milestones are met; however, some require advanced payments. We make estimates of our accrued expenses as of each balance sheet date in our consolidated financial statements based on facts and circumstances known to us at that time. Examples of estimated accrued R&D expenses include fees paid to:

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CROs in connection with performing R&D services on our behalf;

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investigative sites or other providers in connection with clinical trials;

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vendors in connection with non-clinical development activities; and

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vendors related to product manufacturing, development and distribution of clinical supplies.

We base our expenses related to clinical trials on our estimates of the services received and efforts expended pursuant to contracts with multiple CROs that conduct and manage non-clinical studies and clinical trials on our behalf. The financial terms of these agreements are subject to negotiation, vary from contract to contract and may result in uneven payment flows. There may be instances in which payments made to our vendors will exceed the level of services provided and result in a prepayment of the clinical expense. Payments under some of these contracts depend on factors such as the successful enrollment of patients and the completion of clinical trial milestones. In accruing service fees, we estimate the time period over which services will be performed, enrollment of patients, number of sites activated and level of effort to be expended in each period. If the actual timing of the performance of services or the level of effort varies from our estimate, we adjust the accrual or prepaid accordingly. Although we do not expect our estimates to be materially different from amounts actually incurred, our understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and may result in us reporting expenses that are too high or too low in any particular period.

We issue stock-based awards to employees and non-employees, generally in the form of stock options, RSUs, and PSUs.

We measure the compensation expense of employee and non-employee services received in exchange for an award of equity instruments based on the fair value of the award on the grant date. The cost of stock options and RSUs is recognized over the requisite service period of the awards on a straight-line basis with forfeitures recognized as they occur. The vesting condition for PSUs is performance based and the cost of a PSU is recognized when it is likely that the performance goal associated with the PSU will be achieved and the award will vest.

The fair value of options on the date of grant is calculated using the Black-Scholes option pricing model based on key assumptions such as expected volatility and expected term.

We classify stock-based compensation expense in our Consolidated Statements of Operations in the same manner in which the award recipient’s payroll costs and services are classified or in which the award recipient’s service payments are classified.

Recent Accounting Pronouncements

Accounting Pronouncements Not Adopted as of December 31, 2025

ASU 2024-03: Disaggregation of Income Statement Expenses (DISE). This update requires disaggregated disclosure of income statement expenses. This update is effective for fiscal years beginning after December 15, 2027. Early adoption is permitted. The Company is evaluating the effect that ASU 2024-03 will have on its financial statements and disclosures.

ASU 2025-10: Government Grants Topic 832. This update adds guidance on the recognition, measurement and presentation of government grants. This update is effective for fiscal years beginning after December 15, 2028. The Company is evaluating the effect that ASU 2025-10 will have on its financial statements and disclosures.

ASU 2025-11: Interim Reporting Topic 270. This update is intended to improve the navigability of guidance in ASC 270, Interim Reporting, and clarify when it applies. The amendments also provide additional guidance on what disclosures should be provided in interim reporting periods. This update is effective for fiscal years beginning after December 15, 2027. The Company is evaluating the effect that ASU 2025-11 will have on its disclosures.

Accounting Pronouncements Adopted as of December 31, 2025

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which focuses on the rate reconciliation and income taxes paid. ASU No. 2023-09 requires a public business entity (PBE) to disclose, on an annual basis, a tabular rate reconciliation using both percentages and currency amounts, broken out into specified categories with certain reconciling items further broken out by nature and jurisdiction to the extent those items exceed a specified threshold. In addition, all entities are required to disclose income taxes paid, net of refunds received disaggregated by federal, state/local, and foreign and by jurisdiction if the amount is at least 5% of total income tax payments, net of refunds received. For PBEs, the new standard is effective for annual periods beginning after December 15, 2024, with early adoption permitted. An entity may apply the amendments in this ASU prospectively by providing the revised disclosures for the period ending December 31, 2025 and continuing to provide the pre-ASU disclosures for the prior periods, or may apply the amendments retrospectively by providing the revised disclosures for all period presented. As of December 31, 2025, the Company adopted this new ASU retrospectively with all the revised disclosures for 2025 and 2024 presented. The impact of the new ASU was limited to the Company's income tax disclosures with no impact to its operations, cash flows, or financial condition.

Item 7A. Quantitative and Qualitative Disclosures about Market Risks

Not applicable.